Operations Strategy in Global Environmen

Operations Strategy in Global Environment

1. QSO 300: Operations Strategy in Global Environment Dr. Thomas

2. Globalization Globalization means customers, talent, and suppliers are worldwide. The new standards of global competitiveness impact quality, variety, customization, convenience, timeliness, and cost. Globalization strategies contribute efficiency, adding value to products and services, but they also complicate the operations manager’s job. Complexity, risk, and competition are intensified, forcing companies to adjust for a shrinking world.

3. Globalization Reasons domestic business operations transitioned to international operation: 1. Improve the supply chain: The supply chain can often be improved by locating facilities in countries where unique resources are available. 2. Reduce costs and exchange rate risk: Many international operations seek to reduce risks associated with changing currency values (exchange rates) as well as take advantage of the tangible opportunities to reduce their direct costs. Shifting low-skilled jobs to another country has several potential advantages. First, and most obviously, the firm may reduce costs. Second, moving the lower-skilled jobs to a lower cost location frees higher-cost workers for more valuable tasks.

4. Globalization Third, reducing wage costs allows the savings to be invested in improved products and facilities (and the retraining of existing workers, if necessary) at the home location. Operational hedging is maintaining excess capacity in different countries and shifting production levels among those countries as costs and exchange rates change. World Trade Organization (WTO) is an international organization that promotes world trade by lowering barriers to the free flow of goods across borders.

5. Globalization Reasons domestic business operations transitioned to international operation: 3. Improve operations: Operations learn from better understanding of management innovations in different countries. Reduce response time to meet customers’ changing product and service requirements. Providing quick and adequate service is often improved by locating facilities in the customer’s home country.

6. Globalization Reasons domestic business operations transitioned to international operation: 4. Understand markets: Because international operations require interaction with foreign customers, suppliers, and other competitive businesses, international firms inevitably learn about opportunities for new products and services. Knowledge of markets not only helps firms understand where the market is going but also helps firms diversify their customer base, add production flexibility, and smooth the business cycle.Go into foreign markets is the opportunity to extend the life cycle of an existing product. Example: Suzuki cars

7. Globalization Reasons domestic business operations transitioned to international operation: 5. Improve products: Firms serve themselves and their customers well when they remain open to the free flow of ideas. 6. Attract and retain global talent: Global organizations can attract and retain better employees by offering more employment opportunities. They need people in all functional areas and areas of expertise worldwide. Move employees to different locations during economic downturns (relocation)

8. Missions and Strategies Mission is the purpose or rationale for an organization’s existence. Firms achieve missions in three conceptual ways: (1) Differentiation (2) Cost leadership (3) Response: Operations managers are called on to deliver goods and services (1) Better, or at least different (2) Cheaper (3) More responsive. Operations managers translate these strategic concepts into tangible tasks to be accomplished. Any one or combination of these three strategic concepts can generate a system that has a unique advantage over the competition. Competitive advantage implies the creation of a system that has a unique advantage over competitors.

9. Missions and Strategies Mission is the purpose or rationale for an organization’s existence. Firms achieve missions in three conceptual ways: (1) Differentiation: Distinguishing the offerings of an organization in a way that the customer perceives as adding value (uniqueness). Experience differentiation is engaging a customer with a product through imaginative use of the five senses, so the customer “experiences” the product. Example: Movie theaters (IMax/3D) (2) Cost leadership: Low-cost leadership is achieving maximum value, as perceived by the customer.

10. Issues in Operations Strategy Resources view is a method managers use to evaluate the resources at their disposal and manage or alter them to achieve competitive advantage. Value-chain analysis is a way to identify those elements in the product/service chain that uniquely add value. Five forces model is a method of analyzing the five forces in the competitive environment (Porter). Key success factors (KSFs) are activities or factors that are key to achieving competitive advantage. Core competencies are a set of skills, talents, and capabilities in which a firm is particularly strong. Example: McDonald’s KSFs may include layout, its core competency may be consistency and quality.

11. Key success factors (KSFs) & Outsourcing Integrating (combining) OM with other activities Activity map is a graphical link of competitive advantage, KSFs, and supporting activities Outsourcing is transferring a firm’s activities that have traditionally been internal to external suppliers. The expansion is accelerating due to three global trends: (1) increased technological expertise (2) more reliable and cheaper transportation (3) the rapid development and deployment of advancements in telecommunications and computers. Theory of comparative advantage is a theory which states that countries benefit from specializing in (and exporting) goods and services in which they have relative advantage, and they benefit from goods and services in which they have a relative disadvantage [Pages 79 (advantage/disadvantage) 80 pdf in textbook).

12. Outsourcing Issues & Global Operations Strategy Options Integrating (combining) OM with other activities (1) Reduced employment levels (2) Changes in facility requirements (3) Potential adjustments to quality control systems and manufacturing processes (4) Expanded logistics issues, including insurance, tariffs, customs, and timing. International business is a firm that engages in cross-border transactions Multinational corporation (MNC) is a firm that has extensive involvement in international business, owning or controlling facilities in more than one country

13. Outsourcing Issues & Global Operations Strategy Options International strategy is a strategy in which global markets are penetrated using exports and licenses. Multidomestic strategy is a strategy in which operating decisions are decentralized to each country to enhance local responsiveness. Global strategy is a strategy in which operating decisions are centralized and headquarters coordinates the standardization and learning between facilities. Transnational strategy is a strategy that combines the benefits of global-scale efficiencies with the benefits of local responsiveness (Page 80/81 pdf in textbook).

14. Questions?